Bizonia and currency reform

• By 1946 – the USA and Britain were keen to establish a degree of economic recovery in their zones
• British were absorbing huge numbers of German refugees expelled by the Poles and the Czechs
• Continuing dispute with the USSR over the scale of reparations that it could demand from the Western zones 
• USSR systematically removed industrial plant and other resources from Germany to restore its own industrial recovery
• Such reparations had been agreed but the USSR wanted more reparations than the other allies could accept
• May 1946 – Clay announced no further reparations to the USSR would be allowed until there was an overall plan agreed for Germany’s economic recovery
• USSR saw this as an American strategy designed to create a German economy based on the Western capitalist system
• Jan 1947 – British and American zones were merged economically – Bizonia 
• The American position was that this was consistent with the Potsdam Agreement
• Clear indicator that the 4-power control of Germany had failed 
• Soviet response was the oppose Bizonia 
• Council of Ministers = Britain, France, China, the USA, the USSR
• Ministers met at the Moscow Conference during March-April 1947
• USSR demanded that a new central administration should be created
• This attempt failed and no firm decisions on the future of Germany were reached
• Another conference was held in London during Nov-Dec of 1947 - failure
• London - The USSR accused the West of unjustly denying it the reparations it was due
• London - The West feared that a centralised administration would lead to a Soviet-controlled Germany 
• London -  the outcome of this conference was that the Western powers now recognised that 4-power of Germany wouldn’t work 
• London - Now some urgency to strengthen the economy of the Western zones of Germany 
• Move towards the creation of a West German state that was aligned to a Western alliance 
• Between Feb-Jun 1948, Britain, France, the USA, Belgium, the Netherlands and Luxembourg, met in London and made the decision to introduce a new currency into the Western zones of Germany
• It would represent the beginnings of the formation of a separate and distinct West German state
• 7 June 1948 – London Conference – it was agreed that West Germany should have a formal constitution
• The decision to create a West German state was brought about through pressure from both the USA and Britain - France agreed, despite objections